The other day I wrote about Amazon charging UK customers 20% VAT on ebooks while using its base in Luxembourg to pay only 3% itself. Now the European Commission has taken action:
The European commission – which oversees European Union law as the EU's executive arm – on Wednesday gave Luxembourg 30 days to increase its VAT rate on digital services from 3% to 15%. This will close a tax loophole that has encouraged companies such as Amazon, Skype and Netflix to be based in Luxembourg to benefit from the 3% rate when selling throughout the EU. Luxembourg must agree to change its VAT rate before the end of November, or face being referred to the European court of justice and risk fines. France has also been issued with a similar warning over its 7% rate for digital services.
However,
Amazon is expected to contest the commission ruling, so there will be no immediate impact on the cost of ebooks bought from its UK website.
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